Paul Krugman wrote an article today that hits on something many have observed for quite some time: the spreading wave of despair and darkness over average Americans’ lives, in this case, particularly middle-aged whites. This is not a new revelation, but it is something mainstream economists and commentators like Krugman are starting to catch wind of in their thought, at least in the academic/statistical realm. On a side note, while eschewing any exacerbation of this problem by the left and then subsequently blaming the “volatility of right-wing politics,” he still makes some good points, without offering any solutions. Regardless, to point, Krugman writes this:
Tag: Economics Page 1 of 3
The ‘D’ word is being uttered in the mainstream now. Despite whatever the media says concerning the ‘jobless recovery’ we’re in (which is a complete oxymoron) or the ‘summer recovery’ we’ve begun that Obama touted as truth last month, all indicators are pointing to the fact that the US is officially entering an era of economic depression, something not seen in my or my dad’s generation.
The numbers tell the story. A couple of articles in particular are pointing to this fact. One on CNBC, the other by Ambrose Evans-Pritchard of the Telegraph. In addition, even liberal, Keynesian economist Paul Krugman from the New York Times is calling this the beginning of the Third Depression, as I talked about in my last entry. He is dead wrong on how to fix it, but his diagnosis is correct.
It seems this message is becoming more mainstream these days. It’s about time. Max Keiser is right to call this financial terrorism, especially in light of the fact that we, the tax payers, have bailed them out while everyone else is suffering from their dealings, and as a result, they have had record profits this past year. Unbelievable. I’m pro-profit, pro-free-market, pro-conservative, but Max Keiser is also right to call this Rigged Market Capitalism. I can’t think of a better term for it.
Anyone else find it odd the “flash crash” (1000 point dow drop within a matter of minutes) happened right when Congress was negotiating rules regulating derivatives? Oh and oddly enough now, the rules around derivatives have been completely gutted as I understand it. There is rampant corruption and looting going on within the government and the larger corporate world, particularly the monolithic banks. This is not a free market but an oligarchy.
More generally, here are Davidowitz’s views on the economy at large. Even Paul Krugman from the New York Times is calling the Third Great Depression, though he’s completely wrong about the remedy (even more spending).
“Just when you thought the EU could not go any further down the road towards authoritarian excess, it gets worse.” – Ambrose Evans-Pritchard
Things are spinning out of control in Europe, economically, fiscally and socially. German Chancellor Angela Merkel said today that “Europe is in a ‘very, very serious’ situation and that success is not yet guaranteed.” And no amount of money thrown at the situation can fix the structural cracks that are now emerging in the very fabric of the continent.
And what do these things have to do with the US? We face a very similar situation in the near future when compared in parallel to Europe with states versus the federal government. The only difference is the federal government is well established. Certainly there are differences that cannot be overlooked. Yet the situation sounds all too familiar with the federal government over-stepping its reach on several different fronts since Obama took office.
Ambrose Evans-Pritchard from the Telegraph hits on the historical nature of what is happening (history repeating and history being made) as well as the tyrannical nature of what the EU is proposing to alleviate problems. As one commenter said in response to the article, “I’m getting a very bad feeling about how matters economic and social are going to pan out over the next 3 – 5 years. There’s trouble blowing in the wind.”
Below are some of the summary quotes from the article above.
“Fonctionnaires and EU finance ministers will pass judgement on the British (or Dutch, or Danish, or French) budgets before the elected bodies of these ancient and sovereign nations have seen the proposals. Did we not we not fight the English Civil War and kill a king over such a prerogative?”
“Yet again we are discovering the trick played on our democracies by Europe’s insiders when they charged ahead with EMU [European Monetary Union], brushing aside warnings by their own staff economists that monetary union was unworkable without fiscal union. Jacques Delors knew perfectly well that this would lead inevitably to a crisis, but it would be the ‘beneficial crisis’ that would force sovereign parliaments to submit to demands that they would never otherwise accept.”
I couldn’t believe my eyes when I read this. A Federal Reserve senior official, Thomas Hoenig, said this today: “I am confident that holding rates down at artificially low levels over extended periods encourages bubbles, because it encourages debt over equity and consumption over savings.” Whaa?? Someone in the Fed who actually understands the root cause of all of our economic woes and votes for policy against the system? I didn’t know such a person existed in the Fed. He is certainly in the minority, especially with the likes of former Fed Chief Alan Greenspan making remarks recently indicating he had little to do with any sort of macro-bubbles or creating any problems, a notion that Peter Schiff fiercely counters:
Nobel Prize winner of economics in the 20th century, Milton Friedman, explains in this old video why entitlement policies, while well-intentioned, are fundamentally flawed at their root. Really wish we would pay attention to even recent history, let alone distant. We’re a very short-sighted people.
Two kinds of economists exist in the world: those who know first-hand the inner-workings of the economy and those who theorize about how they think it should work and implement policies that have the opposite effect intended. That is the story of the difference between the Austrian school of economics and Keynesianism. One view is real-world, the other is from an alternate universe (yeah, okay, that was a strawman :] ).
Dubai is just a harbinger of things to come for sovereign debt – Jeremy Warner
These are the exact things Peter Schiff and Gerald Celente were warning about a while back. The issue with this surprise Dubai news is not that they may default on $80-90 billion in debt (the news that came out today). Rather, looking into the near future, this event may be a foreshadowing of things to come with the large industrialized nations. That’s why there was a global sell-off.
In 2007 to 2008, a financial crisis came upon the private sector. And so what did governments do? They bought up the debt amounting to trillions of dollars ($15.3 trillion to be exact). So now governments around the world hold an unsustainable amount of debt. Now what? Jeremy Warner explains it well here:
“The fear is that threatened default in this tiny desert kingdom is just a harginger of things to come for government debt markets as a whole. According to new estimates by Moody’s, the credit rating agency, the total stock of sovereign debt worldwide will have risen by nearly 50 per cent between 2007 and 2010 to $15.3 trillion. The great bulk of this increase comes not from irrelevant little states like Dubai, but from the big advanced economies – America, Europe, and Japan.”
“Up until now, markets have assumed that the ruinous fiscal cost of addressing the financial and economic crisis was probably just about affordable to the major economies. That view may be about to be challenged.”
These issues here (amongst others) are exactly why the government should stay out of the free market. Let the companies crash that need to crash. Get rid of the entire category of “too big to fail” and let the market do what it needs to do. Governments, when they intervene, wind up distorting and elongating what should have been a two year economic meltdown at max, only for some form of short-term economic gain. Now, governments are looking like they can’t pay the bills. Lo and behold: Keynesianism in action!
Now we’ll have to see if the rest of Celente’s predictions and forecasting comes true, which is that governments, as a response to not being able to pay debt bills, will have to raise taxes, which will then in response cause some form of a tax revolt among the people. You think the tea parties were crazy? Just wait and see if they try to do this.